Daily Market Lookup

• The U.S. dollar weakened Wednesday, handing back some of the previous session's outsized gains, with traders looking for fresh clues on future U.S. monetary policy from the minutes of the Federal Reserve's December meeting. The dollar index climbed 1% on Tuesday as sentiment was dented by a warning from the International Monetary Fund about a likely global recession in 2023, given economic slowdowns in the main growth-driving regions of the U.S., Europe, and China. However, this dollar strength seems to have run out of steam, with markets now awaiting the release of the Federal Reserve's meeting minutes from December later in the session. The Fed hiked interest rates by 50 basis points in December, a slower pace than the four previous meetings, and these minutes could help shed light on what policymakers are thinking heading into the first meeting of the year in February. This week also features data on jobs, including the official monthly jobs report on Friday. Ahead of that, the JOLTs report on job openings for November is due later Wednesday and is expected to show 10 million openings, which would be a downtick from the prior month. EUR/USD rose 0.6% to 1.0614, after activity in the Spanish services sector expanded for the second consecutive month in December, while French inflation unexpectedly fell in December, dropping to 6.7% during the month, down from 7.1% in November. Economists had predicted the figure would climb slightly to 7.2% USD/JPY fell 0.7% to 130.07, with the yen showing some strength despite data showing that Japanese manufacturing activity contracted for a second consecutive month, weighed by runaway inflation and weak international demand.
• The U.S. dollar climbed strongly Tuesday ahead of the week's key economic data. Tuesday's main economic release is the U.S. manufacturing PMI for December, which is expected to show the sector still in contraction territory However, most eyes will be on the Federal Reserve minutes on Wednesday and U.S. jobs data later in the week to set the early thinking on interest rates in the new year. The Fed raised interest rates by 50 basis points last month, a reduction in size after delivering four consecutive 75 basis point hikes, but has said it may need to keep interest rates higher for longer to tame inflation. USD/JPY fell 0.1% to 130.69, with the yen handing back gains after climbing to a seven-month high against the dollar following the Bank of Japan's decision last month to raise its bond-yield cap. Adding to the expectations that the Japanese central bank was reconsidering its current monetary stance was a Nikkei report, released over the weekend, that said the BOJ was considering raising its inflation forecasts in January. Governor Haruhiko Kuroda has dismissed the chance of a near-term exit from the ultra-loose monetary policy, but the central bank was forced to support the yen late last year as it weakened to a 32-year low against the dollar as the U.S. Federal Reserve aggressively tightened to combat inflation. Elsewhere, EUR/USD fell 0.9% to 1.0566, ahead of the release of key German inflation data, which is expected to show a reduction in annual inflation to 9.1% in December, from 10.0% the prior month. The state of North Rhine-Westphalia - Germany's largest by population and economic output - said annual inflation slowed to 8.7% in December from 10.4% in November and a peak of 11% in October. However, food prices - the largest part of many families' monthly outgoings - rose another 0.5%, leaving them up 13.8% on the year. More worryingly, the overall CPI without volatile food and energy prices rose 1.0%, pushing the annual 'core' measure of inflation up to 4.9% from 4.6%. The risk-sensitive AUD/USD fell 1.2% to 0.6723, while USD/CNY edged 0.1% higher to 6.9045 after data from a private survey, released earlier Tuesday, confirmed Chinese manufacturing activity shrank for a fifth straight month in December, with the Caixin Manufacturing Purchasing Managers Index coming in at 49.0.
• Oil prices rebounded on Thursday amid dollar weakness and as investors emerged to buy dips after two sessions of steep losses, though economic concerns capped recovery. Big declines in the previous two days were driven by worries about a potential global recession, especially since short-term economic signs in the world's two biggest oil consumers, the United States and China, appeared shaky. Reflecting near-term bearishness, the benchmark oil contracts slipped back into contango in Asia trade on Thursday, meaning spot prices were lower than those for delivery months later. Economic data from the United States weighed on prices as U.S. manufacturing contracted further in December. The ISM purchasing managers' index (PMI) for manufacturing dropped for a second straight month in November, to 48.4 from 49.0. It was the weakest reading since May 2020, the Institute for Supply Management (ISM) said.
• At the same time, a survey from the U.S. Labor Department showed job openings had fallen less than expected, raising concerns that the Federal Reserve would use the tight labor market as a reason to keep interest rates higher for longer. Concerns about economic disruption as COVID-19 works its way through China, the world's biggest oil importer, have added to the pessimism around crude prices. The Chinese government increased export quotas for refined oil products in the first batch for 2023, signaling expectations of poor domestic demand. Meanwhile, dollar weakness helped support oil prices, since it typically boosts demand as dollar-denominated commodities become cheaper for holders of other currencies.

Gold – XAU

Gold on Wednesday made its intraday high of US$1865.02/oz and low of $1836.13/oz. Gold is up by 0.836% at US$1854.53/oz.

Technicals in Focus:

In daily charts, prices are above 200DMA (1809) and breakage below will call for 1790. MACD is above the zero line and histograms are a2lso increasing trend and it will bring an upward stance in the upcoming sessions. RSI is in the overbought region and more upside is expected before it gets stretched. The Stochastic Oscillator is in neutral territory and giving a negative crossover to a bearish stance for intraday trade.

Trading Strategy: Sell on Strength

Sell below 1860-1900 keeping stop loss closing above 1900, targeting 1849-1834-1826 and 1808-1790. Buy in between 1849-1800 with risk below 1800, targeting 1860-1,870-1,879 and 1887-1900

Silver - XAG

Silver on Tuesday made its intraday high of US$24.45/oz and low of US23.57/oz settled down by 0.889% at US$23.74/oz.

Technicals in Focus:

On daily charts, silver is sustaining below 100DMA (21.00), breakage above will lead to 21.60. MACD is below the zero line and histograms are decreasing trend and it will bring a bearish stance in the upcoming sessions. RSI is approaching the neutral region, indicating a buy signal for now. The Stochastic Oscillator is in the oversold region and gives a positive crossover to show an upside move for the intraday trade.

Trading Strategy: Buy on Dips

Buy in between 23.60-20.30, targeting 23.30-23.60 and 24.00-24.40-25.00 with stop loss should be placed on the breakage below 20.00. Sell in between 24.00-25.00 with stop loss above 25.00; targeting 22.10-21.70 and 21.30-20.70-20.10.

Oil - WTI

Crude Oil on Wednesday made an intra‐day high of US$77.51/bbl, an intraday low of US$76.72/bbl, and settled down by 3.93% to close at US$77.33/bbl.

Technicals in Focus:

On daily charts, oil is sustaining above its 20DMA i.e. 68.50 which is a support level and breakage below will call for 65.40. MACD is above the zero line and histograms are in increasing mode will bring a bullish stance in the upcoming sessions. The Stochastic Oscillator is in the neutral region, giving a positive crossover for confirmation of a bullish stance; while the RSI is in the neutral region and more upside can be expected to reach the overbought region, which is highly probable.

Trading Strategy: Neutral to Sell

Sell in between 74.10-81.40 with stop loss at 81.40; targeting 73.50-72.90-72.10 and 71.40-70.10-69.00. Buy above 74.10-69.00 with risk daily closing below 69.00; targeting 74.10-75.20-76.10 and 77.00-78.10-80.70.

EUR/USD

EUR/USD on Wednesday made an intraday low of US$1.0540/EUR, a high of US$1.0635/EUR, and settled the day up by 0.537% to close at US$1.0601/EUR.

Technicals in Focus:

On daily charts, prices are sustaining above 50DMA (1.0736), which becomes immediate support, a break below will target 1.0647. MACD is above the zero line and histograms are increasing mode which will bring a bullish view. Stochastic is in overbought territory and giving positive crossovers to the bullish outlook for intraday. 14D RSI is currently in a neutral region and giving no directions to consider right now.

Trading Strategy: Neutral to Sell

Sell below 1.0650-1.0930, targeting 1.0610-1.0580-1.0520 and 1.0490-1.0450-1.0390 with stop-loss at daily closing above 1.0940. Buy above 1.0610-1.0390 with risk below 1.0390 targeting 1.0650-1.0720-1.0790 and 1.0830-1.0900-1.0940.

GBP/USD

GBP/USD on Wednesday made an intra‐day low of US$1.1956/GBP, a high of US$1.2087/GBP, and settled the day up 0.775% to close at US$1.2052/GBP.

Technicals in Focus:

On daily charts, prices are sustaining below 20DMA (1.2113) is becoming a resistance level. 14-D RSI is currently in a neutral region and direction is difficult to predict on RSI bases. The Stochastic Oscillator is in overbought territory and gives a positive crossover to confirm bullish a stance. MACD is above the zero line but histograms are increasing leading to movement.

Trading Strategy: Neutral to Buy

Based on the charts and explanations above; buy in between 1.2030-1.0800 with a target of 1.2090-1.2120-1.2170 and 1.2280-1.2350-1.2410 with a stop loss closing below 1.1950. Sell in between 1.2120-1.2410 with targets at 1.2030-1.1950-1.1870 and 1.0850-1.0800 with stop loss should be 1.2630.

USD/JPY

USD/JPY on Wednesday made an intra‐day low of JPY129.92/USD and made an intraday high of JPY132.71/USD and settled the day up by 1.216% at JPY132.59/USD.

Technicals in Focus:

In daily charts, JPY is sustaining above 200DMA (108.30), which is initial support on the daily chart. 14-D RSI is currently in the overbought region and chances of downward are expected based on RSI. MACD is above the zero line but histograms are in decreasing mode which might lead to downward movement. The Stochastic Oscillator is in neutral territory and signaling to sell as it has given a negative crossover to confirm a bearish stance.

Trading Strategy: Neutral to Sell

Sell below 132.90-136.00 with risk above 136.00 targeting 132.90-131.90-131.10 and 130.40-129.50-129.00. Long positions above 131.90-129.00 with targets of 132.90-134.10-134.90 and 135.40-136.00-137.70 with stops below 129.00.